The first compulsory license in India

Raju Elangovan provides the Indian context to a decision that is getting international attention.

Internationally, in recent months, there has been a lot of discussion about the compulsory license (CL) granted by the Controller of Patents in India to an Indian Pharmaceutical company, Natco Pharma, in March 2012. CL is widely accepted by the Paris Convention and TRIPS. The underlying principle in granting CL is to balance the public good and the interest of the patent holder. A member country of World Trade Organization can provide different forms of CL.

The provisions for granting a CL by the Government is in the patent laws of various countries, such as Canada, France, UK, Australia, Brazil, Malaysia, Thailand, Indonesia, India and Ghana. India is not the first country to issue CL. Many countries have already issued CL in many cases much earlier than India. Then why there is so much of discussion? There are two obvious reasons, namely India and the pharmaceutical industry.

India cannot be ignored. Rapid changes are happening in the social, economical and legal make-up of the country. India is a country of many extremes. The rich and the poor are in the two extremes of the continuum. At the same time, the entrepreneurial zeal is very high. With a huge population, the business opportunities are very good. Many Indian companies are challenging international companies, although India has a long way to go in original research in pharma, biotech and medical devices. Many generic companies in India have started contesting the validity of the patents of the big global pharma companies.

The second reason is that many global pharmaceutical companies are in trouble because R&D is capital intensive, time consuming and comes with a high failure rate. Obviously, CL will have a great impact on their business leadership, R&D, patent rights, profitability and business leadership.

The law on CL in India

In this context, it is worth looking at the provisions of Indian Patents Act which deals with CL. And more specifically, It is better to look at the important sections relied upon by the Controller of Patents in India in the recent case and the rationale given by the controller for his decision.
Procedure for grant of CL in India
• Application by interested person with prescribed form along with fee
• Controller office will check & analyze the application
• Direct the application to serve a copy of the application to patentee
• Patentee to file opposition
• Request for hearing by parties (both applicant & parties)
• Controller will make the decision
To grant CL, the Controller has dealt with the three substantial issues (Section 84(1) a, b and c) whether :

a) The reasonable requirements of the Public with respect to the patented invention have not been satisfied.
b) The patented invention is not available to the public at a reasonably affordable price.
c) The patented invention is not worked in the territory of India.

As per the Section 84(1), at any time after the expiration of three years from the date of the grant of a patent, any person interested may make an application to the controller for grant of CL, on any of the grounds namely 84(1)a, 84(1b), 84(1c).

There are three important criteria:

1) A lapse of three years since the patent was granted.
2) The application should be made by an interested person.
3) Consideration for CL is only given once an application is made and not on the Controller’s initiative.

The controller has dealt with these three criteria and section 84(7a), which gives additional criteria, whether,

1) The demand for the drug has not been met.
2) The request for grant of license was refused by the patent holder.

The Controller compared the price of the drug sold by Bayer, Cipla (another Indian generic company against whom Bayer has filed an infringement case) and the price offered by Natco pharma (the applicant). The price of Bayer was more than 95% higher than Natco pharma1.

It was the opinion of the Controller that the supply and demand gap was not adequately met by Bayer and the drug was not made available to the public at a reasonably affordable price. Another reason cited against Bayer was that even after getting the patent granted in India as early as 2008, the patented invention was not worked in India by Bayer until the date of the application for CL. Bayer’s request for time to work the invention in India was not accepted. The controller granted CL to Natco, approved the price of Natco, decided the royalty and further spelt out the other terms and conditions.

Conclusion

This is the first CL in India. The case will make pharmaceutical companies look again at their business, innovation and marketing policies and the strategies and, more preciously, will compel the companies to review their pricing methodologies. The role of the patent lawyers has been already complicated, with the fact that patents involve three dimensions, namely technology, market and legal.

Now, decisions like this will invite patents lawyers to focus their attention on the specific provisions of local laws, local socioeconomic issues and on the local government’s policies. Patent lawyers will be expected to visualize the future issues that may come up because of the social, economical and political situations in a specific country. As patents are international subject matter, patent lawyers will be expected to advise their clients with the knowledge of the clients’ trade-related competitive intelligence.

As “necessity is the mother of invention”, patent lawyers and business leaders will have to invent new ways of balancing the two extreme demands of protecting the patent holder’s right as well as the interest of the public at large.

Resume

Raju Elangovan, CEO, E-Merge tech Global Services

Raju is the founder and CEO of E-Merge tech, a premier Patent, Technology and Competitive Intelligent services company. E-Merge tech provides a range of services within these three areas, to global customers. He has more than 25 years of experience in various functions including legal from different industries and held “C” level positions in knowledge services companies.